Is A Credit Crunch End Coming Soon?

Now that the wrath of the credit crunch is being felt worldwide, people are starting to ask when a credit crunch end might occur. The answer may not be what most people want to hear.

A credit crunch end could not come soon enough for homeowners on the verge of foreclosure and small business owners unable to secure loans to continue daily operations, but it doesn't look promising that relief will be coming anytime soon. Consider that the crunch was years in the making, and you can expect that it will take at least that long to dig out from under it.

Further, consider that our economy works on a natural rise and fall pattern where circumstances like this credit crunch are not out of the norm. Look into history and you will find the collapse of big businesses, recessions, and depressions have occurred throughout time. In each case there may have been a different cause of the downward decline, but it was always recovered in due time. While looking at events such as the Great Depression does not give much hope right now, it helps to realize that we have recovered from much worse circumstances.

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The current situation started years ago when subprime lending and mortgage backed securities gave banks false securities in issuing loans to thousands of people who actually could not afford to pay back the money down the line. That kind of lending practice can only be sustained for so long before the amount of money available to loan is seriously restricted. It took years to get into this situation, and a credit crunch end will take years to get out of.

There will never come a day that you wake up and suddenly realize that a credit crunch end has arrived. There will not be a sudden stop where things just magically improve. Just as things developed over time, they will slowly start to climb back up to prosperity. Gradual change over a matter of years will eventually bring a financial rise where credit can once again be handed out more freely. The hope is that the next time around lenders as well as borrowers will keep a level head on their shoulders and not get over their heads once again.

The call for a credit crunch end is not a new development. When the stimulus checks were released to tax payers earlier in 2008, US Treasury Secretary Henry Paulson voiced his belief that it would bring a credit crunch end, but it didn't come out that way. It didn't work because Americans are struggling in every economic sector and confidence in the economy as a whole is very low. Most people spent the stimulus money on mortgage payments and other bills, or put it into savings accounts out of fear of future turmoil. The increase in spending that the tax refunds were expected to produce were essentially stifled by panic over the current economic conditions.

Now at the end of the year there is talk of yet another stimulus package, very similar to the first one. With the pressure still on a growing number of people just to remain in their homes, it is not likely that another package will result in more spending this time around either.

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